QuickBooks Study: Cash Flow Woes Mean a Third of Small Businesses Can’t Make Payroll, Pay Bills

“State of Small Business Cash Flow” Explores Small Business and
Self-Employed Cash Flow Behaviors and Attitudes

MOUNTAIN VIEW, Calif.–(BUSINESS WIRE)–Intuit Inc. (Nasdaq:INTU) today released “The
State of Small Business Cash Flow”, a global study focused on the
behaviors, attitudes and status of cash flow challenges experienced by
small businesses and the self-employed. The study found that the
majority of small businesses around the world (61%) struggle with cash
flow, and nearly a third (32%) are unable to either pay vendors, pay
back pending loans, or pay themselves or their employees due to cash
flow issues. This is true in spite of recent tax cuts, regulatory
rollbacks and other stimulus policies that have benefitted small
businesses, with 2 out of 5 small business owners (42%) saying they’ve
experienced cash flow issues in the last year. Furthermore, 69% of small
business owners say they have been kept up at night by ongoing concerns
about their cash flow status.

“Every day, small business owners fight to deliver amazing products and
services for their customers, but – with 50 percent of small businesses
going out of business within five years of opening their doors – the
odds are stacked against them,” said Alex Chriss, General Manager, Small
Business and Self-Employed at Intuit. “The top reason for failure is the
cash flow crunch and lack of flexible options. With this survey, we set
out to understand the why and how behind the crunch, and what Intuit
QuickBooks can do to help.”

Stunting Business and Economic Growth

Achieving a perfect balance of money in and money out (i.e. cash
flow) – and ensuring expenses don’t become more than revenue or
profits – can be a challenge for small business owners. And the impact
that negative cash flow has on small businesses is profound. Many
small companies are operating on margins so thin that frequent lost
opportunities will put them on the path to closing shop. On average,
U.S. small business owners are losing $43,394 annually by foregoing a
project or sales due to issues created by insufficient cash flow.
Additionally, more than half of U.S. (52%) and UK (51%) small business
owners’ companies have lost $10,000 or more by foregoing a project or
sales specifically due to issues created by insufficient cash flow. This
is also true for half of Australian small businesses (50%), 41% of
Canadian small businesses, 23% of Indian small businesses.

Additionally, the inability to pay vendors, loans or employees – a
situation encountered by a third of small businesses due to insufficient
cash flow – damages the very relationships that small businesses and the
self-employed depend on to succeed. In fact, labor costs, like paying
employees or contractors, are often the single largest expense for small
businesses, and none can afford to alienate employees or have high
turnover rates. Among those who have had cash flow issues, more than 2
in 5 (43%) small business owners frequently have been at risk of not
being able to pay their employees by payday.

What’s Driving Cash Flow Problems for Small Businesses and the
Self-Employed

For many small businesses and self-employed workers who struggle with
cash flow, the problem isn’t that they don’t have funds in the pipeline
– it’s that they don’t have the funds readily available for real-time
expenses. One third (33%) of U.S. small business owners estimate their
company currently has more than $20,000 in outstanding receivables, and
the average U.S. small business has $53,399 in outstanding receivables.

When examining many small businesses’ billing practices, these high
figures in outstanding receivables begin to make sense. For example,
more than half of small businesses globally (53%) bill customers for
goods/services on a specific date, compared to 47% that utilize advanced
payment – charging customers for goods/services before or at the time of
receiving them. Furthermore, nearly two thirds (66%) of small business
owners report that the time it takes the money to process after
receiving a payment has the largest impact on their company’s cash flow,
compared to not getting paid by customers or clients within the terms of
the payment system (34%). Finally, nearly a third of small businesses
(31%) estimate it takes more than 30 days to get paid, by customers,
clients, vendors or banks. During this month of lag businesses still
need to cover expenses including overhead and labor costs – thus
creating cash flow woes.

About the Study and QuickBooks

Intuit QuickBooks is committed to solving cash flow issues for millions
of small businesses and self-employed by delivering services and
features that help businesses get money as soon as possible, which
includes everything from payments-enabled
invoicing, same day payroll
services and loans
up to $100,000 based on data within QuickBooks.

The State of Small Business Cash Flow was conducted by Wakefield
Research in Fall 2018 and surveyed 3,000 small business owners of
companies with 0-100 employees in the U.S., UK, Australia, Canada and
India. To read more of the survey data, you can download The State of
Small Business Cash Flow here.

Customer Stories

“As a small business owner, you deal with the stress of cash flow every
day. For us, staying at the top of the market means continually
investing in new product development, but this requires cash. Delays in
payments — for example, having to wait to receive a check via mail and
then deposit it into our accountant — can result is us not having the
cash we need for days or even weeks. The fact that QuickBooks has given
us the ability to allow customers to pay
outstanding invoices electronically is huge. Time is money, and
every day that we go without payment is another day wasted in moving
forward with new products.” — Kyle Scarola, CEO of GOSCOPE

“Cash flow, at least in the printing business, is very difficult. You
have to finance projects, payroll, materials, utilities, fixed overhead
yourself in order to get the job. And of course, there’s a credit risk.
Anytime you offer somebody credit, there’s a chance they might not pay
you. And that is constant challenge for us. Before QuickBooks we had to
have somebody sit there all day and make the phone calls to remind
people to pay their invoice. Now every invoice we send goes out with the
option of paying either by check or by credit card, and we don’t release
the order until a payment has been received.” — Sanjay Sakhuja, Owner
and CEO of DPI

“I’m a bit of a wannabe superhero. I like to think that I can do it all.
And I used to view taking out a loan as a sign of failure. But sometimes
you need the cash, like when a project is put on hold or takes longer
than expected. Since taking out a loan with QuickBooks Capital, my
opinion that seeking a loan is a sign of failure has changed. I think
because the process with QuickBooks Capital was so smooth and so
straightforward, it felt like a supportive process and made a huge
difference to my business. After all, the only thing that can fix cash
flow is cash.” — Itohan Ellis, Space Planning & Interior Design
Specialist at Red Orchid
Designs

About Intuit

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